Chronic Lower Back Pain - the sleeping giant., page-28

Thanks Dachopper for drawing attention to this and particularly for highlighting that the dosage for CLBP is only 6M cells compared to 15M cells for CHF. This is of course quite important in the context of:
i) a lower cost of a 12-month trial (more attractive for a partner) and
ii) a faster ramp-up of sales on approval as limitations on maximum rates of cell-manufacture are less

A hypothetical valuation based on the numbers you've indicated and some conservative assumptions:
• if costs of surgery is $80k-$150k and cells have higher efficacy and show durability, let’s conservatively assume a price of treatment of $20k, a 50% gross margin and so $10k revenue to MSB per treatment in the US
• if there are 1.2 million surgeries in the US per year, let’s assume ~8% initial market penetration or ~100,000 treatments per year in the US within the first few years of approval (assuming manufacturing capacity can be achieved). SurgCenter has 230 ambulatory surgery centres and 2500 surgeon partners throughout the USA; when you consider these distribution networks MSB would have access to, this doesn't seem unreasonable . The treatable market beyond the first few years could potentially be much more than this.
• Gross revenue to MSB would then be in the order of $1B/year or about $1.50/share/year
• On a price/earnings of 30 (noting the above figures are early days with only low market penetration), this leads to a valuation of ~$45/share if approved. This valuation only considers the US.

Based on the above, it is not unreasonable to consider CLBP a 'sleeping giant'.

A few other advantages with CLBP in the context of MSB's current situation:
• if Rem-L for AGvHD is not approved by FDA and cash runway becomes an issue, CLBP product still remains quite a reasonable prospect for partner funding due to the relative speed (large market to recruit from and 12 month duration to establish efficacy) and lower cost (only 6M cells and a day-procedure to administer) and due to the existing relationships MSB has with Gruenthal and SurgCentre. Whilst many have referred to MSB as a ‘binary investment’ based on the AGvHD approval, I would disagree with this.
• the fact that approval might be sought in two markets (Europe as well as US) is also an advantage. If FDA does not initially approve, then an approval in Europe may provide income and/or apply some political pressure for approval in US or other regions.

To balance this out, I do see some disadvantages:
• we’ve seen the importance of establishing mechanism of action, potency assets and critical quality attributes with Rem-L. Significant time and effort has obviously gone into this. One would assume that the development of CQAs for Rex is less mature than Rem-L. It would be interesting to learn if/how CQAs might be transferable between the two products?
• There may be difficulties defining the treatable market. The trial results indicated higher efficacy when taken early. It would be interesting to see how MSB would establish when the treatment should be applied. I could see how this issue might also become a hurdle for the trial and/or labelling on approval.

GLTAH